CULLEN: SALES BAN ONLY THE BEGINNING
Tuesday, November 24th, 2009By Ray Paulick
Know and Trust is a 2-year-old filly owned by some former clients of bloodstock agent Jim Cullen and trained by Cullen’s childhood friend and college roommate William Denzik Jr.
The filly’s name is something of an inside joke: “know and trust” is an expression Cullen often used when communicating with his clients. Today, many of those clients and a variety of others in the Thoroughbred industry feel they have been betrayed or misled by the man who operates Cullen Bloodstock, the Oakland Group advertising and marketing firm, and the now-defunct Four Board Stables. Cullen is currently licensed as a trainer by the Kentucky Horse Racing Commission. He trains a string of horses for his wife under the name Florence Racing Stable and recently claimed a horse on behalf of Margaux Farm’s Steve Johnson. He also sells horse insurance for Old Colony Insurance Company of Lexington.
“We named the filly as an homage to Cullen,” said John Trumbulovich of Chicago, who first got involved with the Kentucky native in 2006. “Obviously we didn’t know him and certainly shouldn’t have trusted him.”
Cullen was recently given a one-year banishment from participation at Keeneland Association auctions, based on violation of a Code of Conduct written by the Sales Integrity Task Force, an initiative of the Thoroughbred Owners and Breeders Association. Fasig-Tipton is also enforcing the one-year suspension, which runs through 2010, and other sales companies around the country are considering taking the same action. The sanctions came earlier in November, nine months after Trumbulovich, Kevin Geiger of Colorado and Vincent Colbert of Massachusetts contacted the Task Force with complaints about their former bloodstock adviser. “We could easily have turned our back on this, walked away and say we got screwed,” Colbert said. “We talked it over and decided we didn’t want this to happen to somebody else.”
But that is just the beginning of Cullen’s troubles. He has been sued by several parties, including horse owner Cam Horton, the stallion season firm Early Season Income, National City Bank, and Wells Fargo Bank. The Internal Revenue Service says Cullen owes $233,143.72 in taxes from 2003-05. He agreed in 2007 to pay Cam Horton $333,000 for not reimbursing Horton for a season to A.P. Indy after Horton’s mare aborted, and has not met that obligation. A Fayette County judge has ordered him to pay National City Bank $348,181.65. Wells Fargo is in the process of foreclosing on Cullen’s home.
Cullen has acknowledged under oath that he hasn’t paid stud fees to a number of farms with which he’s done business, that he may have misstated his ownership or equity in horses used as collateral for a line of credit, and that, at the time of the deposition in March 2009, he couldn’t even examine his own books because “I owe my accountant $1,800.”
Several other parties claim Cullen owes them money, but they’ve given up trying to collect. “I lost quite a bit of money but I just had to get away from him, said Banshee Farm’s Scott Mallory, who “inherited” Cullen as a business partner following the 2006 crash of the Comair flight in Lexington that killed his father, Dan Mallory. “You can’t squeeze blood out of a turnip, so I just decided to leave it alone. He’s always promised ‘I’ll get you paid one of these days,’ but it gets to the point that you want to get as far away from him as you can. That’s what most people have done”
Cullen calls the ban by Keeneland the result of “a banking situation…I understand that two of my clients did not receive my proceeds (from sales of horses),” he told the Paulick Report. “The difficulty is that at least one of the people who filed complaints against me (with the Sales Integrity Task Force) owes me money. This has nothing to do with unscrupulous behavior on my part.”
“Everyone’s always gotten what they paid for,” Cullen continued. “I have not held stud fees. I have had trouble with ESI (Early Season Income)—two separate situations that are not applicable to this decision by Keeneland. I have been working in good faith with ESI and everything, for all intents and purposes, is satisfied.”
A number of people would dispute that statement, including an official at Early Season Income. Cullen’s deposition in the National City lawsuit contradicts what he told the Paulick Report about holding stud fees and everyone he’s done business “always” getting what they paid for.
FROM JOURNALISM TO PINHOOKING
Cullen is a former journalist who worked for Thoroughbred Times as a news reporter, then served as editor of the Texas Thoroughbred magazine while contributing to the Blood-Horse as a free-lance correspondent. He also was employed for a short time by the Thoroughbred Owners and Breeders Association based in Lexington. As recently as August of this year, he was a guest speaker at a new owners’ seminar Blood-Horse Publications sponsored in conjunction with the Texas Thoroughbred Association prior to a Fasig-Tipton yearling sale.
He went to work for Terry Finley’s West Point Thoroughbreds in 2001, operating out of a Lexington office until parting ways in 2003. (Finley opted not to comment on Cullen to the Paulick Report, saying only that he strongly urged Cullen not use Finley as a reference in future job applications.) He also worked briefly selling stallion seasons for Adena Springs in 2006. That ended, according to Jack Brothers, a longtime bloodstock adviser to farm owner Frank Stronach, because of “misappropriated funds.” Cullen claims that Adena owes him money.
A $40,000 purchase of an El Prado yearling in 2003 that turned into a $360,000 pinhooking success the following year put Cullen on the map as a bloodstock agent, and he was able to establish a significant line of credit with National City Bank.
Cullen bought horses at public auction and formed syndicates to race or breed and charged administrative or management fees. Among the partners were Trumbulovich, Geiger and Colbert. Geiger first started asking questions of Cullen about some of the financial aspects of the partnership, among them: how were purse earnings or sales proceeds being distributed? When he didn’t get satisfactory answers Geiger started networking with some of the other partners, including Trumbulovich and Colbert. “It opened a floodgate,” Trumbulovich said.
“Nobody that dealt with him knew who owned what,” said Mallory.
‘I’M A GOOD HORSEMAN. I’M OBVIOUSLY NOT A GOOD BUSINESS PERSON’
A number of mares in the partnerships were bred, and the partners were billed for stud fees, which they subsequently paid for, according to Cullen’s sworn testimony in the March 2009 deposition involving the National City Bank lawsuit. Under questioning from attorney Emily Cowles of Morgan & Pottinger (representing National City) and Mike Meuser of Miller Griffin and Marks (representing Trumbulovic, Colbert and Geiger), Cullen admitted that on numerous occasions he did not use the money billed to clients for stud fees to pay those fees. Many of the fees were never paid to the farms.
Here is an excerpt regarding Cullen’s purchase of stallion seasons, the billing of clients and non-payment to farms:
MEUSER: Okay, and I can show you the other invoices. But on each occasion that you billed Mr. Colbert or Mr. Geiger or Mr. Trumbulovic for these stud feeds you labeled them specifically on your invoice that that’s what they were being billed for.
CULLEN: Correct. Yes, sir.
MEUSER: All right. And you had made the contractual arrangements with the farms to obtain those seasons?
CULLEN: Correct.
MEUSER: And you knew that when you received those monies from my clients you were obligated to to use them to satisfy those obligations?
CULLEN: See, I didn’t know that. I thought like I, like I’ve made clear, I thought that the whole protection of an LLC was designated to give you license to use that to the best benefit of the company as provided you satisfied what this obligation was for.
MEUSER: Well, you can certainly understand…
CULLEN: I can understand. Yes, sir.
MEUSER: … that a client who received this bill and paid it would have the expectation that their agent who they trusted would use those monies properly?
CULLEN: Yes, sir. Yes, sir. I, I agree to that. I mean.
MEUSER: That’s all I have.
CULLEN: Okay.
Meuser and Cowles coaxed out of Cullen admissions that sale proceeds from horses had not been distributed to partners, that stud fees to stallions had not been paid, and that farms often attached liens to the horses being sold, at times without the knowledge of the partners who had paid the stud fees to Cullen. He called the incidents inadvertent errors, and at one point said, “I’m a good horseman. I’m obviously not a good business perso.”
Cullen also admitted that he had not paid Fasig-Tipton for at least two horses he had purchased from the company, including a $100,000 yearling by Yankee Gentleman out of Silver Spool, later named Patsy Ann. Cullen said in his deposition that he has a signed agreement with Fasig-Tipton to pay for the horses because, as he told Fasig-Tipton executive Boyd Browning, “I don’t have it,” when asked for the money to pay for them. He had made no payments on the agreement as of March 2009. “There isn’t a hard schedule…basically it’s open-ended,” he told Cowles under questioning.
“Wow,” was all Cowles could say in response.
“Again,” said Cullen, “I think he’s (Browning)—given the economic climate and the fact he knows I’m a good pay I think he’s—well there’s been one payment made of $4,000….”
“So do you still owe Fasig-Tipton a hundred grand for Patsy Ann,” Cowles asked.
“I do,” said Cullen. “I, I owe them. Technically when we discussed it, and I hope, I don’t think Boyd would mind me sharing, he was willing to basically write it off. And I’m the one that said no. I bought it. I owe you. I will pay you. Just give me the time to pay it off. Anybody that I, I again, I haven’t declared bankruptcy. I’m not running. Any of the accounts I’ve made I’ve been—I will acknowledge and be responsible for. And Boyd knows me and knows that my word is good and I think that’s why he’s allowing me to pay this off.”
When I called Browning at Fasig-Tipton and asked if Cullen owes money to the company, he said, “I’m not going to answer that question. I’m uncomfortable answering that question. It wouldn’t be prudent. His banning (from participation in sales) is not related for any failure to pay money.”
I then told Browning that Cullen said in the deposition that Browning thought Cullen was “good pay.” If put under oath, I asked, would Browning agree with that statement?
There was a pause, followed by a long, slow chuckle. “If I was under oath I would have to answer that question, but I’m not under oath,” Browning said. “I would rather not have Mr. Cullen speak for me.”
Cullen’s relationship with homebuilder Cam Horton began in Dec. 2005 when Horton agreed to buy a season to A.P. Indy through Cullen Bloodstock for $318,000 to use to breed to his mare, Private Pursuit. Cullen would receive a $15,000 fee. The agreement called for the fee to be refunded if the mare did not get in foal or lost her pregnancy. On Oct. 12, 2006, after being pregnant to the cover of A.P. Indy, Private Pursuit aborted, but Horton didn’t get his money back from Cullen. Cullen wrote a letter to Horton in February 2007, saying he was owed $105,000 from Adena Springs for his commissions in “selling $21 million in stud fees,” would sell some horses. In addition, he wrote, he was owed $42,000 in stallion fees and $34,000 was “owed to me by a multi-millionaire who just refuses to pay me even though he acknowledges the debt.”
Horton never got paid and took him to court. In July 2007, Cullen agreed to pay $333,000, with $25,000 payable at the time of the agreement, $75,000 due on or before Aug. 1, 2007, $100,000 due on or before Oct. 1, 2007 andd the balance due by Dec. 31, 2007. Horton’s attorney, Phillip Scott, said Cullen didn’t meet the obligation. “The agreement wasn’t worth the paper it was printed on,” Scott said.
‘YOU CAN GET AWAY WITH A LOT IN THIS BUSINESS’
Of all those who have dealt with Cullen in recent years, no one knows him better than trainer Denzik, who went to grade school, middle school and high school with Cullen, then roomed with him in college. He trained several horses for Cullen’s Four Board Stable partnership until their relationship went sour a couple of years ago.
“We were best friends,” Denzik told the Paulick Report, “but I haven’t talked to him for a year and a half. He wasn’t paying his bills. He was collecting the money from the people in the partnerships and kept it. I know most of the clients and they were a bunch of good people. He owes me over $20,000. We spent about $10,000 on an attorney, but once I got that bill I said this is ridiculous. We probably lost $30,000, but it may be the best $30,000 I ever lost, just to get him out of my life.”
Denzik, like many of the others who have been involved with Cullen, said he has an engaging personality and is a smooth talker.
“He did some acting when he was younger, and he can pull a different personality out when he needs too,” said Denzik. “When I look at him now and look back I can see he was well prepared to do what he’s been doing. People love him at first. He uses his acting ability, his writing ability and he’s personable…but it’s a bunch of b.s. He steals from people. The big questions we’ve all got is where the money went.
“There was always a little bit of a shady side to him,” Denzik said. “As we’ve gotten older it brought out the crook in him that probably has been in him a long time. He figured out you can get away with a lot in this business. I hope he gets put in jail."
Copyright © 2009, The Paulick Report
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